Asymmetric Price Adjustment and the Phillips Curve

Posted: 13 Jul 2002

See all articles by Walter Enders

Walter Enders

University of Alabama - Department of Economics, Finance and Legal Studies

Stan Hurn

Queensland University of Technology - School of Economics and Finance

Abstract

Recent empirical work on the Phillips curve has focused on the convexity of the relationship between inflation and unemployement. In this paper we argue that another potentially important source of nonlinearity in the Phillips curve is to be found in asymmetric price adjustment. If prices rise more easily than they fall, then a threshold autoregressive specification seems a natural framework within which to reexamine the Phillips curve. We examine the Australian data used by a recent article on the Phillips curve and show that there are significant asymmetries in inflation, the Phillips curve and in the behavior of unit labor costs.

Suggested Citation

Enders, Walter and Hurn, Stan, Asymmetric Price Adjustment and the Phillips Curve. Available at SSRN: https://ssrn.com/abstract=313602

Walter Enders (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
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Stan Hurn

Queensland University of Technology - School of Economics and Finance ( email )

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Brisbane, Queensland 4001
Australia
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+61 7 3864 1500 (Fax)

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